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Food ordering app TinyOwl is significantly scaling down operations and is merging with hyperlocal delivery company Roadrunnr

In India, foodtech has to be one of the hardest hit industries in the recent past — thanks to several reasons. Many companies were either shuttered or scaled-down operations, while some fired employees en-masse as part of restructuring.

Over the past few months, big names like Foodpanda and Zomato significantly restructured operations and axed hundreds of jobs, while companies such as Dazo, iTiffin, Kitchit, Dinner Labs, among many others, totally disappeared from the market.

Mumbai-based food ordering app TinyOwl is another high-profile startup that is making headlines these days — for the deep crisis in the company. TinyOwl, which has raised approximately US$28 million from Sequoia Capital, Matrix Partners and Nexus Venture Partners, is now staring at a bleak future.

In a blog post, TinyOwl Co-founder Harshvardhan Mandad announced the firm is scaling-down operations from the current four cities (Mumbai, Bangalore, Hyderabad and Pune) to just one.

“Every company goes through its set of difficulties in its journey, and in my opinion, we are fortunate to see these hardships in our earlier days itself. It gives us a chance to adopt the learnings, imbibe the same in our business model and lay stronger foundations for the brand from a long term perspective.”

“We scale operational resources back from 4 cities and will move to the e-sales platform going forward to support customer needs and supply and logistics requirements. Our current focus remains to be building TinyOwl as a sustainable, profitable and scalable business, with the aim to add more value to our partners and continue to offer the best of food ordering experience to our customers,” he mentions in the post.

The crack began to appear around August last year, when TinyOwl let go of over 100 people employed at its Pune and Bangalore offices, citing cost cutting.

Co-founder Tanuj Khandelwal told Inc42 then, “The elimination of certain positions in the company have been made on a strategic level, to increase efficiency, productivity and re-direct our diverse talent to focused departments, providing the best innovative offerings to our customers. We appreciate the contributions of all the employees in making TinyOwl an amazing growth story. We see this development as a positive move towards growth, and will continue to hire informed talent across the country, to provide our customers a seamless food ordering experience.”

In November, Medianama reported that some of the fired employees held Co-founder Gaurav Choudhary hostage at the company office in Pune.

Also Read: Once VCs’ favourite dish, has Indian foodtech bitten off more than it can chew?

The company could never recover from the crisis. Recent news reports indicate the the crisis is deepening further and the company is on the verge of a shut-down. According to some media reports, it is merging with hyperlocal delivery company Roadrunnr to form an integrated food service startup, while other outlets say it is shutting down.

“It is hard to say whether they are shutting down, but scaling down operations to just a few areas of Mumbai is a clear indication that the company is running on fumes,” Raj K Mitra, AVP (Investment Publishing) at Credit Suisse told e27.

“TinyOwl is reportedly merging with Roadrunnr to form an integrated food service startup called Runnr as both the companies share the same venture capitalists. But Roadrunnr has its own problems and is thus unlikely to be a happy marriage.”

The crisis in TinyOwl is part of a larger crisis affected the Indian foodtech industry. While the opportunities are massive, the sector is nowhere close to maturity, and startups have just scratched the surface. Plus, companies have failed to find a sustainable business model; some still rely on discounts, and last-mile delivery continues to be a huge hurdle. The glamour attached to the sector is wearing off.

More importantly, the economics in India is terrible. For instance, if the order value is US$3, the delivery costs are US$1, the margins are 10 per cent, you will lose US$0.60 per order. Then add to that cost of acquiring a customer, the company will lose a lot more. More the orders, more is the loss.

Adding to that, hardly any innovation is happening in the sector; all companies follow the same business model and lists the same hotels. And they have no control over the quality of food.

Things will be hard for startups to sustain in the long run, unless and until they find a way out in a highly competitive world dominated by the likes of foodpanda.

Mandad is, however, confident: “No dream, however big, is unattainable – and TinyOwl is a testimony of the same belief. From being a five member startup to being one of the youngest and leading players in India’s food ordering space today, TinyOwl has grown immensely in the past year. The big dream to take the brand to greater heights yet remains, as our efforts continue to be focused on strengthening the brand’s position in the market,” he says.

The post This Tiny, 2-year-(Owl)d startup raised US$28M, flew over India, and now looking for a crash landing appeared first on e27.

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